The Court of Appeal has recently given judgment in a case concerning the construction of a list of terms in a contract. This article reviews the case and suggests some drafting points that may be worth bearing in mind.
YES Bank Limited, based in Mumbai, engaged Cantor Fitzgerald & Co, a US broker, to act in connection with a proposed financing.
The terms of appointment were set out in an engagement letter, which provided that Cantor would be paid a retainer of $500,000 and a fee equal to 2% of the funds raised from certain investors in the financing, who were listed in a schedule.
Before the financing could proceed as envisaged, the Reserve Bank of India imposed a moratorium on YES Bank, after which the State Bank of India acquired a 49% stake in the bank, provided a substantial injection of capital, and replaced the board. The new board then raised further funds by way of a public offer, in which certain of the investors listed in the schedule to the engagement letter participated.
YES Bank paid Cantor the $500,000 retainer, but Cantor claimed it was also entitled to 2% of the funds subscribed in the public offer by the investors listed in the schedule to the engagement letter, which had invested about $373 million.
YES Bank declined to pay the 2% fee, noting that the financing contemplated in the engagement letter was described as ‘the private placement, offering or other sale of equity instruments in any form’. Since the investment as actually made was completed pursuant to a public offer, it was not covered by the relevant term in the engagement letter.
Cantor sued YES Bank, arguing that the adjective ‘private’ in the engagement letter should be construed as referring only to ‘placement’, and not to ‘offering or other sale’, so that a public offering would fall within the terms of the engagement. The High Court found for YES Bank, and Cantor appealed.
Giving judgment in the Court of Appeal, Falk LJ, with whom Popplewell LJ and Sir Julian Flaux agreed, upheld the judgment of the High Court. She held that ‘while ...there is no firm grammatical rule to the effect that an adjective or determiner at the start of a list of nouns qualifies them all, the nature of the list may well indicate that it does’.
Further, ‘unless something in the content of the list or another adjective or determiner within the list suggests otherwise, the reader will naturally tend to assume that an adjective or determiner at the start of a list qualifies the entirety of it’. This was not a point of law, but rather ‘an aspect of the ordinary meaning of the words used, which includes their placement within a phrase or sentence’.
Falk LJ went on to consider the contractual context. She held that, because the engagement letter also set out alternative arrangements for Cantor’s engagement in connection with certain other forms of financing, such as qualified institutions placements, it was evident that the 2% fee applied only to a private financing.
This interpretation was also supported by the factual background - there was nothing to suggest that a public offering was in the parties’ contemplation when the engagement letter was entered into, since the capitalisation by the State Bank of India, which made a public offering possible, was not then in prospect.
It does not follow from this case that a preceding adjective will invariably be read as qualifying all the elements in a following list - ultimately, the wording of any contract will fall to be construed in relation to its particular context.
When drafting a contract, if an adjective is intended to apply to every item in the list that follows, it may be worth repeating the adjective before each element, for the avoidance of doubt. Alternatively, if an adjective should be read only with the first element, the list could include other adjectives or numbering to make the intended meaning clear.
Cantor Fitzgerald & Co v YES Bank Limited [2024] EWCA Civ 695
For more information, please contact the corporate team.
We produce a range of insights and publications to help keep our clients up-to-date with legal and sector developments.
Sign up
